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Every property owner is interested in knowing that this
work is honestly and correctly done and that the schedules
and regulations are followed without discrimination. The
property owner is also interested in having the work of the
rate-making bureau done with promptness and with sufScient
frequency so that changes in the hazard will be promptly re-
flected in the rate.

The public is directly interested in that the prompt recog-
nition of improvements by a reduction of rates necessarily en-
courages a general improvement of conditions and reduces the
aggregate fire losses.

The work of rate-making bureaus has been supervised only
in the state of New York, and more recently in the states of
North Carolina, New Jersey, and West Virginia. Such su-
pervision by state authority is of the highest importance from
the point of view of the insured, the public, and the companies
in assuring fair and equal treatment to all persons and such
conduct of the bureau as will encourage the greatest possible
reduction in losses and a fair distribution of the unavoidable
loss. f

Recommendations por Legislation

The following bills are submitted as recommendations for
legislation. In the order given, the bills are believed to con-
stitute logical steps in the development of a supervision of fire
insurance rate-making. In their enactment into law the bills
may be combined or each bill may stand separately. To con-
form to administrative practice and court procedure in the
several states, various changes will need to be made and suit-
able penal provisions inserted.

The recommendations presented also recognize the fact that,
to cover the entire country, they must be elastic and so framed

Digitized by


Report of the Commissioner op Insurance. Ixxxvii

as to readily fit into existing laws, procedure and practice in
the several states. In the note preceding each bill an attempt
has been made to state its purpose and origin and the reasons
for its enactment.

Explanation for Bill No. 1.

This bill provides for the supervision of all rate-making bu-
reaus by the commissioner of insurance, for periodical and oc-
casional examination of all such bureaus at their expense, and
for giving the facts to the public through an official report.

This bill is taken from the statutes of New York, with the
addition of the alternative of accepting the report of examina-
tion by another department.

Such supervision and examination will enable the commis-
sioner of insurance to investigate any question of discrimina-
tion, either between the companies served or between the per-
sons insured, any dishonest or unfair practice, and any other
question which may be raised with regard to the methods of
making rates or other operations of the bureau. By requiring
replies to his inquiries, and through his report of examination,
the commissioner may direct the attention of the bureaus, the
companies, the insured or the public to any abuses, which or-
dinarily will be sufficient to insure their correction.

Bill No. 1. Supervision of Rating Bureaus.

A bill to supervise the operation of fire insurance rate-mak-
ing bureaus, and to provide for their examination by the com-
missioner of insurance.

Section 1. The commissioner of insurance may address in-
quiries to any individual, association or bureau, which is cr has
been engaged in making rates or estimates for rates for fire
insurance upon property in this state in relation to its or-
ganization, maintenance or operation, or any other matter con-
nected with its transactions, and may require the filing of
schedules, rates, forms, rules, regulations and other informa-
tion, and it shall be the duty of every such individual, associa-
tion or bureau, or some officer thereof, to promptly make such
JUin^ and reply tp such inquiries in writing.

Digitized by


Ixxxviii Report op the Commissioner op Insurance.

Section 2. The commissioner of insurance shall have power
to examine any such rating bureau as often as he deems it ex-
pedient to do so, and shall do so not less than once every three
years. A report thereof shall be filed in his office. The com-
missioner of insurance may waive such examination upon the
filing with him of a report of such examination made by some
other insurance department or proper supervising officer with-
in such three years. A statement with regard to such exam-
ination shall be made in the annual report of the commissioner
of insurance.

Explanation for Bill No. 2.

This bill prohibits discrimination by a company or rating bu-
reau in the rates fixed or charged for fire insurance. The pro-
hibition is copied largely from the New York law, as is also the
prohibition that the whole or any part of a risk shall be placed
with certain companies.

The fact that insurance is a quasi-public business in which dis-
crimination cannot be tolerated has long been recognized in
the anti-discrimination statutes applied to life insurance, and
h already recognized in many statutes applied to fire insur-
ance. The requirements of safety and economy both make in-
applicable to insurance the anti-monopoly, anti-trust, and anti-
compact laws looking toward unrestricted and open competition.
Attempts to enforce such competition have uniformly failed.
Public sentiment has changed from regarding fire insurance as
a wager on the part of the company that property would not
bum, against a wager on the part of the owner that it would
bum, to a recognition of the fact that the fire premiums merely
constitute a common fund for the payment of losses. Prom
the latter point of view any discrimination in the common con-
tributions to be made to such fund is necessarily unjust.

The companies are not bound to charge the rates made by the
bureau. Assuming that the work of the bureau is correctly
done, non-discriminatory variations may be permitted, up or
down, from all rates or from the rates on a specified class.

Digitized by



BUI No. 2. Diflcriminatioxifl Prohibited.

A bill prohibiting discrimination in fixing and collecting fire
insurance rates.

Section 1. No fire insurance company or other insurer
against the risk of fire or lightning, nor any rating bureau,
shall fix or charge any rate for fire insurance upon property
in this state which discriminates unfairly between risks in the
application of like charges and credits, or which discriminates
unfairly between risks of essentially the same hazards and
having substantially the same degree of protection against

Section 2. Every such company or other insurer shall at
least fifteen days in advance of any variatiO'n by it ft'om the
bureau rate file with the bureau of which it is a member a
schedule showing such variation.

Section 5. Except as provided in the policy or in the usual
agreement for other insurance, no such insurance company or
insurer, or rating bureau, shall make any contract or argee-
ment with any person insured or to be insured, that the whole
or any part of any insurance shall be written by or placed
with any particular company, insurer, agent, or any group of
companies, insurers, or agents.

Explanation for Bill No. 3.

This bill requires every company to maintain or cooperate in
a public rating bureau; and requires every bureau having two
or more members to accept as members any authorized com-
panies; that the expenses of such bureau be apportioned equit-
ably, and that each company have an equal voice in the manage-

The making of rates is a common benefit to all companies
operating in the same territory and insuring the same classes of
risks. So is the inspection incidental to rate-making. This
bill will authorize one or more bureaus, but in practice econ-
omy will restrict their number and ordinarily there will be but
one — or at the most two— for the same class of risks. This
bill will require companies to directly and openly assume re-
sponsibility for the rates they quote.

Digitized by


xc Report of the Commissioner of iNsuftANct!.

Bill No. 3. Bating Bureaus.

A bill to require fire insurance companies to maintain or co-
operate in maintaining and operating fire insurance rate-mak-
ing bureaus.

Section 1. Ev^ry fire insurance company or other insurer
authorized to effect insurance against the risks of loss or dam-
age by fire or lightning in this state shall maintain or be a
member of a rating bureau. No such insurer shall be a mem-
ber of more than one rating bureau for the purpose of rating
the same risk.

Section 2. A rating bureau may consist of one or more in-
surers, and when consisting of two or more insurers shall admit
to membership any authorized insurer applying therefor. The
expenses of the bureau shall be shared in proportion to tha
gross premiums received by each member during the preceding
year in this state, to which may be added a reasonable annual
fee. Each member shall have one vote.

Section 3. Every rating bureau shall maintain an office
within the United States.

Section 4. Every fire insurance company or other insurer
aforesaid shall in its annual application for license specify
each rating bureau making rates upon property located with-
in this state of which it is a member, and during the year file
written notice of any other such rating bureaus of which it
shall become a member.

Explanation for Bill No. 4.

This bill requires a written survey to be made of each risk
specifically rated. Dwelling houses and other risks for which a
flat rate is quoted are excluded. The requirement of a writ-
ten survey as a permanent public record merely conforms to
the present practice. A copy of such survey should be fur-
nished to the property owner if he so requests.

Bill No. 4. Inspections for Rating.

A bill to provide for an inspecti?n and survey by rating
bureaus of all fire insurance risks specifically rated.

Section 1. Every rating bureau engaged in making rates or
estimates for rates for fire insurance on property in this state

Digitized by


Report oif the Commissioner of iNStJRANctt. ^ci

Bhall inspect ev^ry risk specifically rated by it upon schedule,
and make a written survey of such risk, which shall be filed as
a permanent record in the office of such bureau. A copy of
such survey shall be furnished to the owner upon request.

The committee rejected bills Nos. 5 and 6 as proposed and
amended in committee, and a separate report is submitted here-
with by members favoring these bills in the form specified in
such separate report.

(Signed) Herman L. Ekern, Chairman (Wisconsin)
J. A. 0. Preus (Minnesota)
Sam W. McCuUoch (Pennsylvania)
Frank Hasbrouck (New York)
R. M. Small (Ohio)
Chas. G. Revelle (Missouri)
Burton Mansfield (Connecticut) dissents from the foregoing

Regulation op Agreements and Rates.

The following is the second report adopted by the National
Convention of Insurance Commissioners on December 8, 1914:

To the National Convention of Insurance Commissioners:

The Special Committee on Fire Insurance Rates and Rate-
making submit the following separate report:

** Public interest demands that the business of insurance be
conducted either openly in competition as to the rates charged
or that the agreements between the companies as to the rates
and the rates themselves be subject to state control and regula-

The business of fire insurance is not in practice conducted
upon competitive rates. Fire insurance companies adhere to a
common schedule of rates. The agreement, if not express, is
implied. To the extent that companies in states having anti-
compact and anti-trust laws applicable to fire insurance col-
lect common rates, they are in danger of violating the law.
Where such general practice is justified and demanded by eco-
nomic conditions, it should be recognized and not be prohibited.
The public can be protected by requiring such agreements to be
definite and in writing, and to be made openly and publicly,
and by prohibiting agreements which are found to be contrary
to the public interest." ,

Digitized by


xcii &EPOBT OF a?H£ OomMissioneb of lMSUftAi4cfi.

Explanation for Bill No. 5.

This bill prohibits agreements between fire insurance com-
panies or rating bureaus, with respect to the making, fixing or
collecting of fire insurance rates, except such as are not con-
trary to the prohibitions in the law. All such agreements must
be in writing. A copy of each such agreement must first be
filed with the commissioner of insurance and with each rating
bureau of which any party to such agreement is a member.
Any such agreement may be brought before the commissioner
of insurance for hearing, upon complaint or upon his own mo-
tion, and no such agreement is to be in force after disapproval
of the same by the commissioner of insurance.

Bill No. 5. Agreements to be Public.

A bill relating to agreements between fire insurance compa-
nies or ai^y other insurers, with respect to the fixing and col-
lecting of fire insurance rates.

Section 1. No fire insurance company or any other insurer
and no rating bureau, or any representative of any fire insur-
ance company or other insurer or rating bureau, shall enter
into or act upon any agreement with regard to the making,
fixing or collecting of any rate for fire insurance upon prop-
erty within this state, unless in compliance with this act.

Section 2. Any such agreement may be made and enforced,
provided the same be not contrary to (insert prohibitions con-
forming to law and practice of state) and be in writing, and,
prior to its taking effect, a copy thereof be filed with the com-
missioner of insurance and witii each rating bureau of which
any of the parties thereto shall be a member or subscriber.

Section 3. The commissioner of insurance may, after due
notice and hearing, upon complaint or upon his own motion,
make an order disapproving any such agreement. No snchj
agreement shall be in f orce^ nor shall any act or rights be based
thereon, after service of a copy of such order upon each of the
parties to such agreement and upon each bureau with which
such agreement is required to be filed. Service may be made
by mail and shall be completed upon the expiration of a reas-
onable time for transmission fixed in such order. The action

Digitized by


Report op the Commissioner op Insurance. xciii

of the commissioner of insurance in making or refusing to
make any such order shall be subject to summary review be-
fore a court of competent jurisdiction of this state.

Explanation for Bill No. 6.

This bill authorizes the commissioner of insurance to review
any bureau rate for fire insurance upon property within this
state, upon hearing after notice, subject to court review.

It is now recognized that insurance is a quasi-public business;
that rates should be non-discriminatory ; that it is necessary for
companies to cooperate in making the rates, and that this leads
in most cases to the charging of a common rate. This makes
possible a legalized monopoly and tends to an overcharge or
exaction of undue profits. It follows that where competition
has so failed or ceased there must be regulation. The simplest
form of such regulation is to require the companies to make
rates which shall be just, reasonable, and non-discriminatory,
and to provide for their correction where this has not been
done. The right of companies to refuse to accept any risk or
to vary from the rates fixed as to all property or any class of
property, will enable any company to protect itself from errors
or unjust action on the part of the supervising official. Fur-
ther protection against arbitrary action will be found in a
nummary court review.

Bill No. 6. Review of Discrimination or Bates.

A Un authorising hearing upon and review of the rates fixed
by any bureau for fire insurance upon property within this

Section 1. The commissioner of insurance shall have power,
on written complaint or upon his own motion^ to review any
rate fixed by any bureau for fire insurance upon property with-
in this state, for the purpose of determining whether the same
is discriminatory or unjust. He shall have power to order
fhe discrimination removed or to fix and order substituted a
bureau rate which is not discriminatory or unjust. A review
of such bureau rate before the commissioner of insurance shall
be had only after due notice and hearing, and his findings or
order shall in all cases be subject to summary court review by

Digitized by


xciv Report op the Commissioner op Insurance.

a court of competent jurisdiction of this state, and in the event
of final determination against any insurer any overcharge
during the pendency of such proceedings shall be refunded to
the persons entitled thereto.

Where the law prohibits all agreements as to the collection
of the rates, including a prohibition against agreements that
membership in a bureau shall be maintained for a specified pe-
riod or that a member shall refrain from maintaining its own
bureau, the foregoing bill No. 6 should be changed by striking
out the words **or unjust'' following the word "discrimina-
tory'' and by striking out the words *'or to fix and order sub-
stituted a bureau rate which is not discriminatory or unjust'*
and inserting in lieu of the latter the following:

''No discrimination shall be removed by increasing the rate
or rates on any risk or class of risks affected by such order
unless it shall be made to appear to the commissioner of insur-
ance that such increase is justifiable, and an order of approval
has been filed in his ofSce."

(Signed) Herman L. Ekem ^Wisconsin)
Chas. G. Revelle (Missouri)
J. A. 0. Preus (Minnesota)
R. M. Small (Ohio)

Burton Mansfield (Connecticut)

Frank Hasbrouck (New York)

S. W. McCulloch (Pennsylvania)
dissent from the foregoing report.

Digitized by


Report of the Commissioner of Insurance.


Wisconsin Fire Insurance Businicss.

The amount and character of the business transacted in the
state by fire insurance companies, during 1913, is shown by the
following table:

No. of

Net amount

Net ore-
miums re-

Net losses

Ratio Of

net losses

1 ncurred

OKt Lie

tmiums ro


Wisconsin stock








$586,549 01
5,216,874 52

40,714 81
1.546,318 88

43,697 56

135,075 12
363,532 60
87.640 63

$161,756 93

2.042,182 75

11,939 95

27 6

Stock fire of other states .


ForeUrn fire

587,5'^C 36 38.0

Foreljm marluH

30,381 94 Ail ft

Wisconsin mutuals

Mutiials of other stat«s. .




61.337 86
40,927 34
5.384 95

$2,941,438 08




$8,020,403 IS




1. Assurance Company of America. New York City .Aug. 12, 1913

2. Automobile Insurance Co Hartford, Conn July 17, 1913

3. Columbian National Ins. Co Detroit, Mich Aug. 30, 1913

4. Twin City Fire Ins. Co Minneapolis, Minn Dec. 29, 1913


5. Arkwright Mutual Fire Ins. Co. .

6. Baltimore Mutual Fire Ins. Co. .

7. Blackstone Mutual Fire Ins. Co.

8. Cotton & Woolen Mfgrs. Mut.

Ins. Co

9. Fall River Mfgrs. Mut. Ins. Co.

10. Hope Mutual Fire Ins. Co

11. Industrial Mutual Fire Ins. Co.

12. Maryland Mutual Fire Ins. Co.

13. Mercantile Mutual Fire Ins. Co.

14. Merchants Mutual Fire Ins. Co.

Boston, Mass Dec. 27, 1913

Baltimore, Md Oct. 13, 1913

Providence, R. I Jan. 10, 1913

Boston, Mass June 23, 1913

Fall River, Mass June 25, 1913

Providence, R. I July 17, 1913

Boston, Mass June 23, 1913

Baltimore, Md April 13, 1913

Providence, R. I Oct. 15, 1913

Providence, R. I Jan. 10, 1913

Digitized by


xcvi Report of the Commissioner of Insurance.

15. Mill Owners Mut. Fire Ins. Co. .Chicago, 111 Oct. 16, 1913

16. Narragansett Mut. Fire Ins. Co. . Providence, R. I Sept. 15, 1913

17. Northwestern Mut Fire Assn .. Seattle, Wash Nov. 6, 1913

18. Ohio Farmers Ins. Co LeRoy, O Mar. 4, 1913

19. Patapsco Mutual Fire Ins. Co. . .Baltimore, Md Oct. 13, 1913

20. Philadelphia Mfgrs. Mut. Fire

Ins. Co Philadelphia, Pa. . . . .Sept. 12, 1913

21. Protection Mutual Fire Ins. Co. .Chicago 111 Oct. 16, 1913

22. Rubber Mfgrs. Mutual Ins. Co. .Boston, Mass June 23, 1913

23. Standard Mutual Fire Ins. Co. . .Philadelphia, Pa. June 12, 1913

24. Textile Mfgrs. Mut. Fire Ins. Co.Providence R. I Oct. 15, 1913

25. What Cheer Mut. Fire Ins. Co. .Providence R. I July 17, 1913

26. Worcester Mfgrs. Mut Ins. Co.. Worcester, Mass May 29, 1913


27. Canners Exchange New York City Oct. 10, 1913

28. Individual Underwriters New York City Sept. 22, 1913

29. Lumber Mfgrs. Inter-Ins. Assn. New York City Oct 13, 1913

30. Lbrmen's Underwriter Alliance. Kansas City, Mo Aug. 15, 1913

31. Mfg. Lumbermen's Underwrites . Kansas City, Mo Oct 16, 1913

32. Mfg. Woodworkers UnderwritersChicago, 111 Nov. 14, 1913

33. N. Y. Reciprocal Underwriters. .New York City Sept 22, 1913

34. Reciprocal Exchange Kansas City, Mo July 3, 1913

35. Underwriters Exchange Chicago, 111 Dec. 12, 1913


36. Nat Underwriters of America.. New York City Sept 12, 1913

37. N. Y. ft Boston Lloyds New York City Sept 12, 1913

88. Underwriters at Amer. Lloyds. .New York City Sept 12, 1913

39. Underwriters at Great Western New York City Sept 12, 1913

40. Union Underwriters New York City Sept 12, 1913


41. Netherlands Fire and Life The Hague. Holland. .April 21, 1913

42. Union Assurance Society London, Eng. Mar. 27, 1913

43. Urbaine Fire Ins. Co Paris, France April 28, 1913


Wholesale Grocers Reciprocal Insurance Exchange, St Louis, Mo.
Did not have the number of risks in force required by law.

Digitized by


Report of the Commissioner of Insurance. xcvii


BufTalo Ins. Co., Buffalo, N. Y. Admitted May 19,
1S96. Reinsured all Its outstanding liabilities in the Buffalo Ger-
man Ins. Co., March 1, 1912.

California Insurance Company, San Francisco, Cal. Admitted
Sept. 22, 1908. Sold its assets to the Union Asfsurance Company of
Great Britain, Feb. 11, 1913, which assumed all its outstanding lia-

Calumet Insurance Company, Chicago, 111. Admitted April 3,
1905. Reinsured in the National Union Fire Ins. Co., of Pittsburgh,
Pa., Oct. 27, 1913.

Frankona Reinsurance Company, Frankfort, Germany. Admitted
Jan. 13. 1912. Retired from the state July 25, 1913.

Nassau & Dutchess Fire Insurance Company, New York City. Ad-
mitted Dec. 23, 1912. Merged with the Williamsburg City Fire Ins.
Co., Dec. 31, 1913, under the name of the latter company.

Teutonia. Insurance Company, New Orleans, La. Admitted
March 7, 1871. Went into liquidation May, 1913, and reinsured it0
liabilities in the Hartford Fire Ins. Co., May 24 1913.

United American Fire Insurance Company, Milwaukee, Wis. Ad-
mitted Aug. 24, 1899. Reinsured Its outstanding liabilities in the
Twin City Fire Ins. Co., of Minneapolis, Dec. 15, 1913.

Warsaw Fire Insurance Company, Warsaw, Russia. Admitted
May 17. 1912. Retired from the state May 13, 1913.

Ins. — g

Digitized by


xcviii Report of the Gouiossioner op Insurance.
















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Online LibraryWisconsin. Dept. of InsuranceReport → online text (page 9 of 94)